TY - JOUR
AU - Lundberg,Shelly
AU - Pollak,Robert A.
TI - Efficiency in Marriage
JF - National Bureau of Economic Research Working Paper Series
VL - No. 8642
PY - 2001
Y2 - December 2001
DO - 10.3386/w8642
UR - http://www.nber.org/papers/w8642
L1 - http://www.nber.org/papers/w8642.pdf
N1 - Author contact info:
Shelly Lundberg
Department of Economics
University of California at Santa Barbara
Santa Barbara, CA 93106
Tel: (805) 893-8619
E-Mail: slundberg@ucsb.edu
Robert A. Pollak
Washington University in St. Louis
Arts and Sciences
and the Olin Business School
Campus Box 1133
1 Brookings Drive
St. Louis, MO 63130-4899
Tel: 314/935-4918
Fax: 314/935-6359
E-Mail: pollak@wustl.edu
AB - Economists usually assume that bargaining in marriage leads to efficient outcomes. The most convincing rationale for this assumption is the belief that efficient allocations are likely to emerge from repeated interactions in stationary environments, and that marriage provides such an environment. This paper argues that when a current decision affects future bargaining power, inefficient outcomes are plausible. If the spouses could make binding commitments -- in effect, commitments to refrain from exploiting the future bargaining advantage -- then the inefficiency would disappear. But spouses seldom can make binding commitments regarding allocation within marriage. To investigate the efficiency of bargaining within marriage when choices affect future bargaining power, we consider the location decisions of two-earner couples. These location decisions are transparent and analytically tractable examples of choices likely to affect future bargaining power, but the logic of our analysis applies to many other decisions. For example, decisions about education, fertility, and labor force participation are also potential sources of inefficiency.
ER -